Organizational Ecology
by
Erlan Bakiev, Ph. D.
Zirve University
Spring 2012
Organizational Ecology (OE)
• Organizational ecology (OE) is also known as
organizational demography and the population
ecology of organizations
• OE refers to the study of “life” in an organizational
habitat
• OE is a theoretical and empirical approach in the social
sciences that is especially used in Organizational
Studies.
• Organizational ecology utilizes insights from biology,
economics, and sociology, and employs statistical
analysis to try to understand the conditions under
which organizations emerge, grow, and die.
OE History
Introduced in 1977 by Michael T. Hannan and the
late John H. Freeman in their The population ecology
of organizations (American Journal of Sociology)
Later refined in their 1989 book Organization
Ecology, organizational ecology examines the
environment in which organizations compete and a
process like natural selection occurs.
This theory looks at the death of organizations (firm
mortality), the birth of new organizations
(organizational founding), as well as organizational
growth and change.
OE History Cont.
• In the 1970s and 1980s, the Total Quality
Movement (TQM) played a large and active
role in many organizations as the “new
wave” of quality moved from Japan across
the seas to the United States, Canada and
beyond.
OE History Cont.
• Major theory and research in organizational
ecology are reviewed, with an emphasis on
the organization and population levels of
analysis and processes of organizational
foundings, mortality, and change (Singh and
Lumbsden, 1990)
• The main approach to organizational
foundings examines the roles of density
dependence and population dynamics.
OE History Cont.
• According to Singh and Lumbsden (1990)
there are six theoretical approaches which
examine organizational mortality :
• fitness set theory,
• liability of newness,
• density dependence,
• resource partitioning,
• liability of smallness,
• the effects of founding conditions.
OE History Cont.
• Organizational ecology contains a number
of more specific 'theory approaches:
including:
•
•
•
•
•
Inertia and change
Niche width
Resource partitioning
Density dependence
Age dependence
OE History Cont.
• Organizational ecology has over the years become
one of the central fields in organizational studies,
and is known for its empirical, quantitative
character.
• Ecological studies usually have a large-scale,
longitudinal focus (datasets often span several
decades, sometimes even centuries).
OE History Cont.
The books:
• The Demography of Corporations and
Industries by Glenn Carroll and Michael
Hannan (2000)
• Logics of Organization Theory: Audiences,
Codes, and Ecologies by Michael Hannan,
Laszlo Polos, and Glenn Carroll (2007),
provide the most comprehensive overview of
the various theories and methods in
organizational ecology.
İnertia and Change
• This theory fragment holds that organizations
that are reliable and accountable are those that
can survive (favored by selection).
• A negative by-product, however, of the need
for reliability and accountability is a high
degree of inertia and a resistance to change.
• A key prediction of organizational ecology is
that the process of change itself is so disruptive
that it will result in an elevated rate of
mortality.
İnertia and Change Cont.
• Theories about inertia and change are
fundamental to the research program of
organizational ecology, which seeks a better
understanding of the broader changes in the
organizational landscape.
• Given the limits on firm-level adaptation, most
of these broader changes thus come from the
entry and selective replacement of
organizations.
• Hence organizational ecology has spent
considerable effort on understanding the
founding and mortality rates of organizations.
Niche theory
• The theory fragment on niche width distinguishes
broadly between two types of organizations:
generalists and specialists
• Specialist organizations maximize their
exploitation of the environment and accept the risk
of experiencing a change in that environment.
• On the other hand, generalist organizations accept
a lower level of exploitation in return for greater
security (Hannan and Freeman 1977: 948).
Niche theory Cont.
• Niche theory shows that specialization is generally
favored in stable or certain environments.
• However, the main contribution of the niche
theory is probably the finding that “generalism is
not always optimal in uncertain environments”
(Hannan and Freeman 1977: 958).
• The exception is produced by environments which
“place very different demands on the organization,
and the duration of environmental states is short
relative to the life of the organization” (Hannan
and Freeman 1977: 958)
Resource Partitioning
• The relationship between generalists and
specialist organizations is further developed
in the resource-partitioning model which
includes predictions about the founding and
mortality rates of both specialists and
generalists as a function of market
concentration.
Resource Partitioning Cont.
• The theory can be illustrated by describing
two environments. Environment A stands for
an un-concentrated mass market and
environment B represents a concentrated
mass market. In environment B, generalists
will always attempt to address the center of
the market where most resources peak. After
all, in the center of the market these
generalists can thrive by exploiting
economies of scale
Resource Partitioning Cont.
• İn environment B, despite the very concentrated
generalists market, the resource space outside this
market [i.e. in the periphery of the market] is larger
than in environment A, where the generalist market
is less concentrated (Carroll 1985:1272).
• The abundance of resource in the periphery can
then become hospitable to specialist organizations,
and the market becomes effectively partitioned.
Carroll concluded that “more available resources
should translate into better chances of success for
specialists when they operate in the more
concentrated market” (Carroll 1985:1272).
Density Dependence
• Organizational ecology also predicts that
the rates of founding and mortality are
dependent on the number of organizations
(density) in the market. The two central
mechanisms here are legitimation (the
recognition or taken-for-grantedness of that
group of organizations) and competition.
Density Dependence Cont.
• Legitimation generally increases (at a decreasing
rate) with the number of organizations, but so does
competition (at an increasing rate). The result is that
legitimation processes will prevail at low numbers
of organizations, while competition at high
numbers.
Density Dependence Cont.
• The founding rate will therefore first increase
with the number of organizations (due to an
increase in legitimation) but will decrease at high
numbers of organizations (due to competition).
The reverse holds for mortality rates. Thus, the
relationship of density to founding rates has an
inverted U shape and the relationship of density
to mortality rates follows a U-shaped pattern.
Age Dependence
• How an organization's risk of mortality relates to
the age of that organization has also been
extensively examined. Here, organizational
ecologists have found a number of patterns:
• Liability of newness. Here, the risk of failure is
high initially but declines as the organization ages
Age Dependence Cont.
• Liability of adolescence. The risk of mortality will
be low at first as the organization is buffered from
failure due to support by external constituents and
initial endowments. But when these initial
resources become depleted, the mortality hazard
shoots up and then declines following the liability
of newness pattern.
Age Dependence Cont.
• Liabilities of aging. Here, the risk of failure
increases with organizational age. This
could be due to a liability of senescence
(internal inefficiencies arising from the
aging of the organization) or a liability of
obsolescence (a growing external mismatch
with the environment).